Spending Ban: How Beneficial and Harmful?

What do you do when you've already spent the entire salary even before you cut a week off the calendar in a month – ask your friend for some advances, or call your sister for a money transfer, or simply avail a payday loan from whatever party ready to provide! Well, whatever you do and wherever you arrange your money from, you will fall into the trap of a yet another loan making your balances fall further into the abyss. This situation demands that you need to cut on your expenses to gain back a track of your finance. Well, this is high time for you to give that extravagant devil sitting inside of you a punch of spending ban.

Sounds strange? Well, it is and you must be thinking- what on earth a spending ban is?

A spending ban, as it will also sound extreme to you, is a period anywhere between a week or a month, or sometimes a year during which a person resolves not to spend even a cent on anything other than the necessities. It's a good and a proven way to get back in touch of your financial discipline and find contentment with what you already have.

Why Such an Extreme Move?

Well, you have to! Getting a hold on a shade of your personality, especially a darker one like a Shopaholic personality, demands an extreme resolve from you. Setting a specific goal is more useful than just generally sputtering, “I've gotta stop spending money!”. That way you have a clearly defined goal in front of your eyes, and your saved money has a tangible reward. However, it is not that much extreme as it sounds. Also, your ban may be much or less extreme, as per your needs. Find what works best for you and your goals.

Understand Your Rules Before You Commit to Them

A spending ban or 'financial fast' doesn't eliminate all forms of spending - just the non-necessities. Non-necessities vary from person-to-person. However, you can generally place anything you don't need to survive or do your job in this category, such as magazines, a new piece of clothing, or decorative home items. The bottom line is that you shouldn't make the decision to do a no-spend challenge on a whim. Consider the implications carefully, know your limits, and other life circumstances. For example, if work is going to be insane for you in the next month, perhaps you are better off delaying until things calm down.

So, define several different aspects of the ban, and write out the rules. Keep them in a visible location, so that you have a constant reminder of what you are working on and why.

• Pick a Length for the Ban: Since you are starting on this, you should go with the one that's doable. Michelle Singletary of The Washington Post recommends a 21-day financial fast. This is a good length of time to try out on your own limits. Three weeks is long enough to make a serious difference in your habits and your finances. After this, you can increase your length of time as per your need and requirement.

• Set an Amount that’s Doable: Before you begin your ban, compile a list of your essentials and their total monthly cost, and compare the amount of your monthly income to get a sense of how much you're able to save. For example, if your monthly take-home pay is $2,500 and your monthly essentials cost $1,500, you could potentially save $1,000 during each month through your spending ban.

• Set an Allowance: You can't just spend your three weeks or so without any expense. Set an allowance to account for things like an oil change for your car, an ice cream for your kid, or going on a dinner with your date. These things need not be stopped. Just set aside a certain amount from each of your paychecks so that you don't have to feel guilty for them.

• Pay with Cash Only: This is one of the best ways to keep a track on your expenses. When you pay cash for each of your purchases, you get to have an idea about your spending habits. Also, you'll know how much you have left to spend so you'll end up being more frugal.

• Keep a Spending Journal: This is for having a brief summary of your daily expenses. Every time you spend a dollar, note it down in your spending journal. This will be your guiding book for your next day expenses. Also, it will be your guiding data for the next time you go on a spending ban again.

• Know Where The Extra Money Will Go: You should have a goal in mind for the money you are saving through it. Don't let your savings sit idle. You can send the money to your savings account, your debt, your retirement account, or your children's college fund where it will be utilized in some of your long-term financial goal.

Benefits of a Spending Ban

The biggest part of the appeal of a spending ban is the challenge of changing your habits for a set amount of time. There are other direct benefits that will help build you a completely new personality in terms of your money spending habits. They are:

• Identify Between Wants and Necessities: The ultimate goal of a spending ban is to help you in developing an eye for recognizing the materials of your need. You will be able to differentiate between what you want to have and what you really need to survive. You become spending conscious and eliminate the habit of impulse buying that saves your money.

• You Learn to Work With What You Have: A spending ban will enable you to make with whatever you have, in terms of your cloth, your kitchen and pantry, other stationary like books or DVDs.

• Bring Your Current Finance in Order: The money that went out on account of your impulse buying is not going to come back. But, a spending ban will definitely help you in bringing your current finances in order. It can help you in paying some of your debt, or spending in businesses like high-yielding online savings account, or ETFs that will give you extra income in return.

• Uncover Spending Triggers: Promotional emails, shopping apps, retailers on social media, etc, triggers your impulses to buy things that you actually do not need. You do these purchases without ever noticing their presence. With spending ban, you get to identify and eliminate them.

• A Life Lesson to Live Happily: Spending ban has a lasting impact on your life. It will not only help you save money during an extreme measure such as itself but also in your everyday spending habits by developing economical traits in you.

Some Pitfalls to Avoid

A spending ban will definitely help you in bringing your finance in order, if you follow your rules whole heartedly. Though, there are things you should take care of to ensure all your commitment and hard labor does not go for anything:

• Keep a Check on Your Temptations: Don't get tempted by your buying impulses. The whole purpose of your spending ban will be defeated if you spend your saved money in the middle of or right after the end of the ban. So, unsubscribe from emails, uninstall any shopping apps on your phone and don't clip any coupons. Just because something is on a sale, you don't need to buy it!

• Back-up Plans for Unexpected Events: You should have a plan for any surprising event or emergencies during your ban. For example, your child may be called in a surprise birthday party of his friend and in that case you have to come up with something to buy him a gift for his friend. If you fail in that, you may find yourself guilty.

• Can Affect Your Relationship: You should not take it to a level where it starts affecting your relationship. Your kids, your spouse, or even your friends may come up with any sort of emergency requirements. In that case, if you refuse to help them with your money, it can affect your relationship with them.